Is ESG data the new oil?
Article by May Al-Karooni, CEO and Founder
The word sustainability has been used to describe everything “green”, but it is very intangible and hard for a corporate to measure their impact and add a figure to it. Recently this has changed with us seeing investors like BlackRock emphasise the importance of ESG data and that this will become one of the key metrics by which companies are going to be valued by.
ESG data refers to environment, social and governance data, which are the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. Historically the Governance accounted for 50% of the data, but this is now changing. Since ESG is not standardized today, corporates use their own methods to measure what ESG’s are important to their businesses. Indexes such as The Dow Jones Sustainability Index, London Stock Exchange and Bloomberg all have comprehensive ESG portals. The size of the ESG data market is growing fast, and the trend is expected to continue. It is estimated that the total spend on ESG data, including ESG content and indices, were at $505 million in 2018 and are expected to reach $745 million by the end of 2020.
In January 2016, the United Nations released the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda. This brought more focus on business becoming more sustainable, incorporating the goals into their strategies, and reporting results in their annual reports. We are starting to see the call for sustainability and circular economy business models as critical parts of a business’s post COVID-19 strategy. This shift will see an increase in demand for ESG data as the foundation to build and quantify the sustainability initiatives implemented.
The idea of providing ESG data back to corporate clients at Globechain started when I initially started fundraising. Potential investors were asking questions such as what is the market cap/valuation, which was extremely difficult for me to answer as there was no market or market cap for reuse. This was before it was estimated that the circular economy could generate $4.5 trillion of additional economic output by 2030. I realised then that going forwards ESG data was going to become valuable to clients, as more investors were incorporating ESG data into their financial analysis to give them crucial insight into the risks and opportunities in our ever-changing global economy.
I believe the circular economy is the new business model of the future, and at Globechain, we are one of the pioneers enabling corporates to become more circular through reuse. Globechain makes it really easy for corporates to dispose of unneeded items through the marketplace, and receive ESG data in return in simple quantitative and qualitative forms. This data is then used for credit financing, share pricing, tax offsetting, amongst other things and is becoming a large part of the corporate accounting process after profit.
